Sen. John McCain delivers an economic speech during a campaign event at Carnegie Mellon University, Tuesday, April 15, 2008, in Pittsburgh. (AP Photo/Mary Altaffer)
by Frank James
One of the big ideas out of Sen. John McCain’s Carnegie-Mellon University speech today was his idea for a tax holiday from the 18.4 cents federal gas tax for essentially the entire summer driving season.
It’s a great populist notion. Who doesn’t want to pay lower prices at the pump, especially with gas prices hovering near $4 a gallon More Top Picks Best Foldable Solar Panels For Camping
But there are obvious problems. For instance, what would stop gas retailers from just hiking their prices to capture the savings?
And if the gas-tax holiday led consumers to drive more, the entire benefit of suspending the gas tax could easily be lost to the price pressures that would come from higher demand.
The gas tax also funds the highway trust fund which pays for the building and repair of interstate highways and bridges. Given the aging state of the nation’s infrastructure, it wouldn’t seem like the best time to reduce the funds available for road projects.
Then there’s the pressure that comes from global oil prices, which crossed the $114 a barrel threshold today. Such upward pressures would likely erase any relief afforded by a gas tax holiday.
The Wall Street Journal’s Washington Wire blog has a useful posting by Stephen Powers on what generally happens to Washington proposals for gas-tax holidays. In short, they go nowhere, evaporating like gas vapors on a summer day. The gas tax holiday was just part of the plan McCain outlined in a speech today whose intent was to say to the voters “Message: I care,” to quote former President George H.W. Bush.
Here’s the McCain campaign’s fact sheet on its candidate’s proposals.
Today, In Pennsylvania, John McCain Outlined A Comprehensive Pro-Growth Strategy That Includes Several New Initiatives. Included in this plan are several new initiatives to help Americans confront economic challenges while focusing government on actually helping families.
The New Initiatives:
GAS PRICES: John McCain Believes We Should Institute A Summer Gas Tax Holiday. Hard-working American families are suffering from higher gasoline prices. John McCain calls on Congress to suspend the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day to Labor Day.
STUDENT LOANS: John McCain Is Proposing A Student Loan Continuity Plan. Students face the possibility that the credit crunch will disrupt loans for the fall semester. John McCain calls on the federal government and the 50 governors to anticipate problems and expand the lender-of-last resort capabilities for each state’s guarantee agency.
MIDDLE CLASS TAX CUTS: John McCain Will Double The Personal Exemption For Dependents. John McCain believes the tax code should be less of a burden on those, whether they are mothers and fathers or single parents, who are trying to raise a family. He proposes to raise the personal exemption for each dependent from $3,500 to $7,000.
A SIMPLER TAX CODE: John McCain Will Propose An Alternative New And Simpler Tax System — And Give America A Real Choice. When this reform is enacted, all who wish to stay under the current system could still do so, but everyone else could choose a vastly less complicated system with two tax rates and a generous standard deduction. Americans do not resent paying their rightful share of taxes — what they do resent is being subjected to thousands of pages of needless and often irrational rules and demands from the IRS.
GOVERNMENT SPENDING: John McCain Proposes A One-Year Spending Pause To Evaluate Programs. He believes that outside of essential military and veterans programs there should be a one-year discretionary spending pause that should be used for a top-to-bottom review of the effectiveness of federal programs.
MEDICARE GROWTH: John McCain Believes That We Should Not Subsidize The Prescription Drugs Of America’s Most Affluent Individuals. He will propose reforms to reduce the large subsidies in the Medicare drug program.